Thursday, September 27, 2012

If you follow the release of government economic data, you know that data is released and then is usually revised a short time later as the information is further refined. Case in point: the second quarter Gross Domestic Product (GDP) for 2012 was revised downward from 1.7% to 1.3% Now this doesn't sound like much, but when you are talking about an economy that is nearly $15 trillion, it is a very significant number. Why is this important to you and me? It simply means that as our economy limps along with a miniscule rate of growth, new jobs are not being added that would help reduce unemployment. Our economic malaise is going to continue for a while. Orders for durable goods slumped 13% in the second quarter, and this means that many factories will be curtailing production and the corresponding hours for their workers. There are many reasons that we find our economy in this situation, and the road to recovery will require that Washington loses its antagonism toward job creating businesses and creates an environment that fosters job growth.

Do pyromaniacs wear blazers?

About that environment for job growth... According to a poll of small business owners and manufacturers by the National Association of Manufacturers and the National Federation of Independent Businesses, 69% say that the regulatory policies of the Obama administration have hurt their business. More ominously for job growth, 67% say there is too much uncertainty to expand their business and hire new workers. Why is this ominous? 85% of the new jobs in this country are created by small businesses, defined as companies that employ 50 people or less. When these employers are in a pull back mode, new jobs are not going to be created. By the way, do you think the massive tax increases on small businesses and individuals scheduled to happen January 1 are helping the situation? Neither did I. Here are two other responses from the survey that stand out to me: 55% said they would not start a business today given the current environment; and 54% said China and India are more supportive of their small businesses than is the U.S. Friends, unless we get real leadership in Washington that will work to reverse these negative trends and improve the climate for the business community, our economy is going to continue to shrink. And we will all suffer.

Issues? I don't have issues. I have a full subscription.

As part of the problem with our sluggish economy, consumer spending has been declining. The main reason for that is that personal incomes are falling. Significantly. The latest data from Sentier Research shows that personal income fell 1.1% in August, to a median household level of $50,678. Since the economic "recovery" began in 2009, personal incomes are down 5.7%. Since President Obama assumed office, personal incomes are down 8.2%. Why is this important? Besides having less money in your pocket each month, we are spending more of our income on necessities- food, gas, utilities, health care- and have less disposable income to spend on things like movies or dining out. This is significant, because 70% of our Gross Domestic Product (GDP) is driven by what you and I do with the spending of our income. Since we have less, the economy contracts and unemployment goes up. You can see the vicious and downward spiral that quickly can (it has already occurred) occur. This is why it it so important to realize that high taxes and burdensome regulations that stifle job growth contribute mightily to economic stagnation if not outright decline. January 1, taxes are going up dramatically unless Congress acts. If taxes rise and pull more money out of your control, do you think it is going to foster an environment for growth, or will it further cripple the economy? I think you know the answer. This election is about deciding our future economic trajectory- we can continue to slip to a lower standard of living or we can reverse course and begin to lift the regulatory and tax burdens that are crippling our job creators and in turn put more money in our wallets instead of Washington.

I don't have to worry about going through a mid-life crisis. I have been in crisis mode since I was a teen.

Thursday, September 20, 2012

Lots of folks all atwitter about Mitt Romney stating that 47% of the population are dependent on the federal government and would never vote for him anyway. While most folks are focused on the effect of this statement on his candidacy for the White House, the reality is that he is right. Look at this chart:

The data compiled by the Office of Management and Budget show a startling trajectory in our federal spending, and that is that nearly 70% of our total spending is some form of transfer payments to individuals. For perspective, realize that in 1952, less than one out of every six dollars collected in taxes was transferred to individuals. Now it is roughly two of every three dollars. Think those folks are going to vote for a candidate that wants to change this system? Absolutely not, because it is a pretty sweet deal. As I have said previously in other blog posts, some of these payments, such as Social Security, are obligations that should be fulfilled. However, failing to reform these entitlements will lead to their ultimate demise. Why do I say that? Take a look at this chart:

﻿The other side of this problem is that at the end of 2010, 41% of federal tax filers had zero or negative income tax liability after taking their deductions and credits. From 1950 to 2000, this number hovered in the 20-25% range.

The problem is obvious. A growing segment of the population that is dependent on the entitlements distributed by the federal government and a shrinking base of tax payers is a formula for fiscal disaster. To do nothing means that we not only will we break the promise that we have made to present and future beneficiaries, but the probability of those programs failing is almost certain.

The more fundamental problem with our government today is that first and foremost, it has become a gargantuan wealth transfer apparatus. Money is extracted from the working class and transferred to groups that can provides the most benefits- read: votes- to the political class.

This makes controlling federal spending exceedingly difficult. Reforming entitlements and reining in spending means that some part of that 70% receiving payments is going to be affected. Reform entitlements and spending, and part of that gargantuan wealth transfer apparatus that is the federal government can be dismantled.

Mitt was right. His percentages were a bit off, but as the OMB data shows, there is a huge segment of the population that benefits from the current system of wealth transfer. Reforming that system will be a fight.

A fight of, well, gargantuan proportions.

It will require a re-ordering of our priorities as a nation. Fundamental to that will be the debate over the role of government. If government is limited in power; if power and decisions are pushed out of Washington and back to the states and municipalities where they can be more effectively made and executed, then we can begin to reverse this process.

As a nation, we can continue on the path where we find ourselves today. That is the choice of this election. Continue on the path to a European style welfare state, or begin to restore the vision of of a nation that allowed individuals to strive to succeed and to reap the rewards of their efforts.

I will tell you that the move to the European style welfare state will not end well. No nation or economy that has undertaken the massive transfer of wealth as a guiding principal has grown and thrived.

Unless this trend is reversed, the economic future of our nation is grim.

Wednesday, September 19, 2012

That is how much the Predators Foundation has distributed since its inception to charities in Middle Tennessee.

It's difficult to quantify that positive impact and the lives that have been improved by gifts from the Foundation. All of this is made possible through the generous donations of fans of the Predators, and they were out in full force on Monday night as over 1,100 people filled the floor of the Bridgestone Arena for Petey's Party. The event raises funds for the Predators Foundation and Peterson's Foundation for Parkinson's Research.

Those in attendance were treated to a great evening of entertainment and dining as well as an opportunity to bid on numerous silent auction items. Despite the lock out, most of the team was there to support the event.

Here are some pictures from the evening:

The arena floor before the guests arrive

Paul McCann and his wife Denise, with Travis Ruffin

Sheila and Terry Crisp, ready to spend some money at the silent auction

Some of the many jerseys autographed by NHL players that were auctioned off at the event

Hypnotist Rich Guzzi with some hypnotized volunteers, including Tom Cigarran (second from left) of the Predators ownership group. It was probably the first time for any of us in attendance to hear Chinese rap.

Pierre McQuire of NBC Sports and Gord Miller of TSN helped by leading a live auction for a trip with the team

Brent Peterson spoke about coping with Parkinson's in a heartfelt speech

Pekka Rinne looking over some of the silent auction items

Head Coach Barry Trotz and some guy

Ben Butzbach and Justin Bradford of Penalty Box Radio

Phil Vassar and his band rocked to close out the evening

This evening of fun and entertainment provided funds to support Parkinson's research and the charitable activities of the Predators Foundation. Many thanks to all those in attendance for their generous support, and to the players, coaches, and friends of the team for their support.

Friday, September 14, 2012

This past week, 25,000 teachers walked off the job in Chicago in a strike over benefits and teacher evaluations. The Chicago Teachers Union had asked for a 30% pay increase, despite the fact that the District faces a $700 million current deficit and a projected deficit of $3 billion over the next three years. The Chicago School Board countered with a 16% increase over 4 years and implementation of a new teacher evaluation system. Here is what you should know about this situation: Chicago teachers make an average of $71,000 per year BEFORE benefits and work one of the country's shortest school days. "So what?" you say, as long as the children in they system are learning and progressing. About that... According to the U.S. Department of Education, 79% of 8th graders in the Chicago public school system are not grade level proficient in reading; 80% are not grade level proficient in math. It would seem to me that if teachers in a particular school district are some of the highest paid in the country, the results would be significantly better than these. Of a particular concern to the Teachers Union representing the Chicago teachers is a more comprehensive evaluation of individual teachers. The school board proposed to make student performance count for 40% of a teacher's annual evaluation. The Union has said no. So the Union wants no consideration of student performance in teacher evaluations and a pay increase that will break the bank of the school board. Let me be very clear about this: I highly respect good teachers that dedicate their lives to imparting wisdom and improving the educational experience of their students. But the sad fact is that we have a public sector union representing the teachers that cares nothing about that. They are willing to strike for unrealistic salary demands and have no regard for educational experience of their students. If we are going to improve public sector education in the U.S., this has to change.

"Always leave them wanting more"- my approach to paying bills.

Last Friday, the unemployment numbers were released, and has been the case over the past several years, there was no movement as unemployment remains intractably over 8% of the work force (frequent readers know that is the nominal, or U-2 rate. Real unemployment, or U-6, remains around 15%). Here is some insight about those number that were released last Friday: work force participation (WFP) fell to a 31 year low. Simply put, the number of people in the work environment is lower than it has been in over 3 decades. Why is this important? Particularly troubling is the level of participation in the work force of those in the 22-55 age bracket. Typically, those in the younger part of this bracket are getting married, buying and furnishing houses, and starting families. All of those activities are good for the economy, and they typically occur when those people of that age are employed. Oh yeah, they pay a lot of taxes that help support our entitlement programs. However, as many in this group have dropped out of the work environment and have stopped looking for jobs at all, those potential dollars that they would earn and spend are not circulating through the economy, and they are not paying taxes that would support the current level of entitlement spending by Washington. If we are going to change the direction of our economy and become fiscally healthy again, we are going to have to change the policies that create impediments to job growth, especially for those in this age group.

I have a super talented friend that can read Braille with his eyes closed.

Gas prices soaring. The economy struggling. America in a funk, her might diminished. The Obama presidency? Well, yes. But it was also the Jimmy Carter presidency of the late 70's. After four years of mis-management and ineptitude, Carter and the failed policies of the Democrats were rejected by voters. Why bring this up? Because today we are hearing that America is the source of trouble and problems all over the world. We are in a national funk. Unbelievably, our economy is about as screwed up as it was during the Carter years. And to solve all our problems? More government control and higher taxes. History has proven all those negatives and "solutions" to be wrong. After a painful series of steps to get our economy moving, Ronald Reagan got federal government out of the way of the business community and lowered taxes. In the process, he unleashed one of the greatest periods of economic growth and personal prosperity in the history of our country. He lowered taxes and guess what? Tax revenues to the government went up. Why? Because the economy grew dramatically. Pride in our nation, its people, and our defense of freedom around the world soared. There was no apology about being a "city on a hill, a beacon of freedom for the world." It is easy to look at our economy and the political mess that is Washington and get discouraged. But history- recent history- has shown that our country and our people can and will do great things if given the opportunity. And that is what the November election is about. The choices are simple. We can choose to be wards of the state and never achieve greatness. Or we can do what was done to Carter and his inept management of this country and choose to once again embrace the fact that what makes our country great is you and me. And we don't have to apologize for that.

I tried to draw a picture using invisible ink, but all I drew was a blank.

Thursday, September 6, 2012

$16 trillion. This past week, the U.S. national debt passed $16 trillion. A number of that magnitude boggles the mind and it is hard to really get a grasp of what that means. Fear not, friends. The View is here to help put this number in perspective. At $16 trillion, our debt is now greater than the total value of the U.S. Gross Domestic Product (GDP), or the goods and services that our country produces. Our current GDP is $14.8 trillion. The significance of that fact is simply this: we could tax 100% of our nation's income of production or national income and still not erase our deficit. The debt per taxpayer is an astounding $111,414 and growing. Every child that is born in 2012 is saddled with $50,000 in debt. Keep in mind that interest rates are near zero, and when they start to rise- and they will- the interest that we will be paying on our national debt will be more than the entire budget for the Department of Defense. The size of our debt is problematic, but the fundamental problem that we face in our country is that Washington has no control over their spending habits. Don't believe me? Since Obama took office, our national debt has ballooned from $10.6 trillion to $16 trillion. Congress has raised the debt ceiling 13 times since 2001, characteristic of their inability to exact fiscal discipline. Furthermore, our annual deficits- what the federal government spends relative to what it collects in taxes- now tops $1 trillion. These numbers point out that we cannot tax our way out of these problems. We must, as a nation, begin to take serious steps to rein in spending and impose fiscal discipline. Until that happens, our country is traveling the same road as Greece.

I saw a flying saucer today. It appeared right after the flying cup my wife threw at me.

How did we get in this fiscal mess? There are a number of reasons, but I believe that it has roots in the arrogance of power. Our federal lackeys, both elected officials and bureaucrats, believe that government knows best what is right for the market, for business, and for the individual. Washington believes it knows better what works in Nashville than those who are in Nashville. Government has insinuated itself into all facets of our life, and has attempted to control our life in a way that has been unprecedented. Want proof? Dodd/Frank, legislation that was passed to regulate business and banking, was 849 pages and created over 1,000 new laws and regulations. Obamacare, the socialized medical program that was rammed through Congress, is over 13,000 pages and implements a myriad of rules and taxes, many of which we are still discovering (remember then Speaker Nancy Pelosi infamously stating that 'We have to pass this bill to find out what is in it."). Our federal tax code is 73,608 pages and the federal register that clarifies some of the tax rules is 82,419 pages. By contrast, our Constitution is 6 pages. Our Founding Fathers knew that the government that governed least governed best. That ethic has been lost as Washington has usurped power and control over most of the aspects of our daily life. The result of this overreaching is a fiscal mess of unprecedented proportions. We have a choice as an electorate: we can continue the present course that our government is taking and we will spend ourselves into oblivion. Or we can take control of our government once again and force our leaders to live within their means and limit their power.

My wife and I have religious differences. She refuses to worship me.

Generally accepted accounting principles require businesses to account for future liabilities. Future liabilities are monies that are owed but are not due in the current tax or calendar year. Build a new plant and finance the construction over several years, and the future liabilities are what is owed or due in more than a year. Our government has future liabilities as well. If you are paying into Social Security, you expect to get that money back when you become eligible to receive payments from the SS trust fund. That is a future liability of our government. Lost in all the talk of our current deficit is the fact that our government has some massive future liabilities. Money is owed to future social security recipients and promised under other entitlement programs. How much? Estimates range from $120-200 TRILLION. Lawrence Kotlikoff of Boston University estimates $220 trillion dollars. These unfunded liabilities are going to completely swamp the government. What is going to happen? Taxes will most assuredly go up, but as we have seen, taxation alone will not solve the problem. Future beneficiaries will, I believe, face significant means tests before they receive benefits. That simply means that if you have saved and done what is prudent, you will not receive the full benefit that you are due. Your benefits will be cut. By now, I am sure you see the absurdity of where these programs have devolved. Be prudent financially, save your money, and you are going to pay a penalty through reduced payments. Be profligate, don't prepare financially, and you will be rewarded with full benefits. Now I ask you, do you think Washington should be as involved in as much of of personal and business life as it currently is? I think this example should answer that question for you.